Despite a regulation crackdown and other issues, investors have continued to fund cryptocurrency startups in 2018, with ICOs raising $11.8 billion this year through May.
According to a Wall Street Journal analysis of nearly 900 offerings listed on ICOBench.com, that is more than double the $5.5 billion ICOs raised all of last year.
This year’s surge comes as ICOs have faced stricter scrutiny from regulators like the U.S. Securities and Exchange Commission (SEC). In fact, U.S. Representative Brad Sherman (D-Calif.) said earlier this year that he believes ICOs are detrimental to the economy.
“The reason for securities markets is to provide jobs in the real economy,” Sherman said during a House subcommittee meeting in April. “An IPO [initial public offering] does that; an ICO does the opposite. It takes money out of the real economy.”
In addition, there have been numerous incidents of fraud that have kept some retail investors away. However, big technology-focused investors haven’t been as deterred.
Some of the big ICOs this year include Telegram Group, the developer of messaging app Telegram, which raised $1.7 billion earlier this year, and Block.one, which raised an estimated $4 billion for its EOS network in June.
Yet even excluding those two ICOs, the fundraising total for the first half of 2018 still exceeds all of 2017. There are also more ICOs being offered in general, with around 490 coin offerings raising an average $24 million in the first five months of 2018. That's compared to the 300 startups that raised an average of $14 million over the final five months of 2017.
And while U.S.-based startups dominate the market, Switzerland and other countries are gaining ground as they adopt ICO-friendly policies and the U.S. boosts its regulatory oversight.
With that in mind, many startups are limiting their offerings to accredited investors to avoid getting into trouble with the SEC. Telegram, for example, called off a public offering last month.
“The public markets are basically dead,” said Kyle Samani, co-founder and managing partner of crypto-focused investment fund Multicoin Capital. “The private market is going to be hot for a while.”